Economists at Nedbank expect South Africa to post a quarterly decline in gross domestic product (GDP) for the second quarter of 2026, with private-sector investment slipping for a second straight quarter. The forecast matters most to small and medium enterprises that rely on construction work, manufacturing orders or retail footfall, because a weaker economy can translate into fewer contracts and lower consumer spending.
GDP measures the total value of goods and services produced in a country. A contraction means the economy is shrinking rather than growing. Nedbank projects real GDP, that is, growth adjusted for inflation, to move from a 0.5% rise in the first quarter to a 0.2% fall in the second quarter.
The bank points to high-frequency indicators that show weakness in mining, manufacturing, electricity, gas, water and domestic trade. By contrast, agriculture and parts of the services sector appear to be holding up, but the gains are unlikely to offset the broader slowdown. Construction is hit especially hard; its share of value added fell from 4.2% in 2008 to 2.3% in 2025, according to Statistics South Africa.
Fixed investment, also called gross fixed capital formation (GFCF), fell by 1.1% in the first quarter and is projected to decline by another 0.7% in the second quarter. GFCF tracks the net addition of assets such as buildings, machinery and infrastructure, and is a key barometer of future productive capacity. Private-sector spending disappointed in Q1 and is expected to disappoint again, while public-sector outlays have started to recover from a low base.
Even with the modest lift from public projects and a tentative rise in renewable-energy spending, Nedbank says the outlook remains tilted to the downside. Risks include heightened geopolitical tensions, higher oil prices and weaker global growth, all of which could cause firms to delay or scale back capital plans. Domestic constraints, notably crime and disruptions in the construction sector, add further headwinds.
What the numbers mean for small businesses
President Cyril Ramaphosa has set a target of 3% annual growth and aims for GFCF to reach about 30% of GDP by 2030, far above the current 14%. The government’s infrastructure pipeline lists more than 170 projects, with 55 under construction and valued at over R407 billion. However, Nedbank’s data show the announced value of investment projects fell by 81%, roughly R580 billion, from 2025 to the first half of 2026.
For SMEs, the key takeaway is that demand for construction-related goods and services may stay muted in the near term. Companies that supply building materials, equipment rentals or engineering services should prepare for slower order books and consider diversifying into renewable-energy projects, which the bank expects to receive modest support.
Retailers and traders should watch consumer confidence closely, as a contracting GDP often leads to tighter household budgets. Managing cash flow, renegotiating supplier terms and keeping a close eye on inventory levels will be essential if the GDP figures released by Statistics South Africa on 8 September confirm the downturn.
The next few weeks will reveal whether the economy is indeed slipping into contraction. If the data align with Nedbank’s forecast, small businesses will need to adjust plans, seek cost efficiencies and stay alert to any policy shifts that could improve the investment climate.
Why fixed investment is the number to watch
Economists tend to treat gross fixed capital formation as a more reliable early warning signal than the headline GDP figure itself, because it reflects decisions businesses are making about the next one to five years, not just current-quarter output. A company delays a new factory line or a fleet upgrade well before its current sales actually decline, which is why GFCF weakening for a second consecutive quarter, as Nedbank’s forecast describes, is typically read as a leading indicator of broader economic softness rather than a lagging confirmation of it.
South Africa’s investment-to-GDP ratio has sat well below both the government’s own target and the level typically associated with sustained emerging-market growth for over a decade, a gap most economists attribute to a mix of policy uncertainty, load-shedding-era damage to investor confidence that has been slow to reverse even as electricity supply has stabilised, and persistently high borrowing costs relative to peer economies. The government’s infrastructure pipeline is one of the few policy levers available to offset weak private investment in the short term, since public capital spending can be scheduled and funded independent of business sentiment, but a pipeline of announced projects only supports growth once shovels are actually in the ground, which is why the gap between projects announced and projects under construction matters as much as the headline pipeline value.
